Charged Up! podcast: Earn more, owe less

Episode 75 with journalist, author Jordan Goodman

Charged Up! with Jenny Hoff

 



Are you tired of paying off a 30-year mortgage and feeling like you aren't making a dent in your principal? Or, could you use hundreds of thousands of dollars by cashing in on a policy you may not even remember you have? Veteran financial journalist and author of "Master Your Debt," Jordan Goodman promises these aren't scams. He says there are tools that you should be using to increase the return you get on your savings, lower your debt quickly and get money that may be owed to you. It's worth keeping an open mind and hearing some tips that could change the quality of your life. 

So, let's get Charged Up! about learning how to earn more and owe less!

Transcript:

Jenny Hoff:  Hi, Jordan. It's really a pleasure to talk with you today.

Jordan Goodman:  Great to be with you, Jenny.

Hoff:  So let's start with your background. You're America's money answers man, how did you fall into that role or take on that role? What motivated you to get into this field and give us a little bit about your background in finance?

Goodman:  Sure. So I've been a financial journalist for almost 40 years. I was at Money Magazine for 18 years, that's where I really got the passion for helping people with all their financial decisions. Undergraduate I went to school in Amherst College and London School of Economics, went to Columbia School of Journalism for my master's where I specialized in the economic and business journalism. That was kind of the beginning of it all. But it is really at Money Magazine where I developed this whole interest in how to help people in all aspects of their money investing, debt, insurance, just this whole area a long, long time. And started my website moneyanswers.com in 1993, that's how far back this goes, and I've been improving it ever since and doing videos and links and calling radio shows and 13 books. So I just love helping people with their personal financial decisions.

I find that there's a lot of resources they don't know about that if they do will make a big difference in their lives and hopefully some of those things we'll get to talk about today.

Hoff:  Yeah, absolutely and that's what I like, it's not really just general advice and there's a lot of great general advice out there that people just having that knowledge it can change their lives, but I like how you include in your book and in your tips really direct phone numbers even that people can call, like they don't have to do the work, here's the phone number, here's a website that you can go to, here's a company that can offer you that product or whatever that assistance, and I think that is really helpful in not only the first step of learning but the second step of here's exactly what you need to do.

Goodman:  I'm all about implementation, you're right.

Hoff:  I love that.

Goodman:  You can have an idea, but if you don't implement it it's not going to do you much good.

Hoff:  Exactly. So your book Master Your Debt has a lot of great advice regarding all types of debt, but we're going to talk about some topics that we actually haven't ever covered before in the show - resources people may not know about to get their mortgage paid off faster, make money off their savings if it's not making money in the bank, all of those kinds of things. So let's start though with making more money off your savings because it's really a time where you can be very good, very responsible, you're saving up money, you have it in the bank and you're getting almost nothing for it. If you're lucky 1 percent if you're going with like an online bank or something, but generally you're getting almost nothing for it.

You say there is a better way to make money off your savings in secured real estate funds; can you talk about that a little bit?

Goodman:  So that's right, so this is what I call the saver's dilemma. You keep it in the bank, see these money market funds, savings accounts, you're going to get pretty much zero. That's going to stay that way as far as the eye can see, Jenny. Because even though the Federal Reserve's in raising rates on what banks charge they don't control what banks pay, and therefore the banks can get away with it and they'll continue to get away with as long as they can. So, don't assume you're going to get anything in the bank for any significant thing over 1 percent.

And then meanwhile if you go to traditional ways of earning yields - bonds, real estate investment trusts, mass limited partnerships, utilities, as interest rates have been rising and I think will continue to you are going to lose a lot more in principle than you're earning an interest on those, so that's not a particularly good solution either. So yes, the solution to what I call the saver's dilemma are secured real estate funds, because that's a way of earning an 8 percent yield over a one-year time frame where the net asset value does not change. It stays at $10 a share, it doesn't go up, it doesn't go down. So as interest rates keep rising you're not losing the value of your principal that way.

There's a website related to it - securedrealestatefunds.com, and what they're doing is they're lending money short-term over a year or so to high-quality commercial real estate projects all over the country like 30 different ones at any particular time, so it's geographically diversified and they'll do like apartment buildings, medical offices, assisted living, student housing, parking lots, just all kinds of different things that have a hard time getting financing from the banks that are so difficult these days. So you're kind of filling a niche these ways.

Now this is what the Securities and Exchange Commission calls a regulation A+ fund which commonly would be known as a crowd funding fund. These have only been around for about two years because the Congress in 2012 passed what's called the JOBS Act of 2012, which authorized crowd funding funds. The SEC took awhile to figure it out, started approving these things in 2016, and this was one of the first ones out there.

Minimum of $5,000, no commissions, minimum hold time, one year, you can get monthly checks if you like or you can reinvest it and have it compound. So, there's a way right there, Jenny that people can get 8 percent without market volatility as opposed to zero in the bank or 3 percent with lots of market volatility in bonds and bond surrogates.

Hoff:  So how do we know that there's no market volatility with this? What if there was another real estate crash and somehow does this protect you against that?

Goodman:  Well, it doesn't protect you completely. I mean, there is risk in real estate; I would never use the word guaranteed or anything like that. But they mitigate the risks in various ways. I mean, we talked about the diversification; they tend to lend in growing areas to builder developers who've got a long-term track record of doing these things. They don't give them the money all upfront; they give it to them in stages. So, dig the foundation, we'll inspect it, OK, you did it right, now we'll give you the next 10 percent. And the maximum that they lend is 70 percent of the value of the property. So, the builder always has at least 30 percent if not more skin in the game to make sure the project gets done. And also, the projects make economic sense, typically they're adding value to an existing piece of real estate, so again the builder has every reason to want to get this thing done.

I'll give you an example, Jenny, of one they did recently. A guy had a big house in Boulder, Colorado, he'd been renting out to two students forever. He got a loan from the fund, re-jiggered the house, a year later had four apartments instead of two in the same building. So, the income with the building was up 100 percent actually. So he has every reason to get that project done because he knows once it's done his income is going to be much higher. So that's the way of mitigating the risks.

But if we had a complete total disaster, yes, there's some downside to these kinds of things.

Hoff:  And can you choose which projects you want to invest in? Or is it just altogether bundled?

Goodman:  Altogether, and that's the good thing. You don't have to be a real estate expert yourself, management has been doing this for 30 years, they managed the whole thing. It's completely passive income from your point of view. All you have to do to get the 8 percent is wake up in the morning breathing and you're done.

Hoff:  OK, and so basically if I put $10,000 into this I would get a check for $800 at the end of the year?

Goodman:  Well, you're getting paid monthly.

Hoff:  OK.

Goodman:  You're getting paid monthly. So you get about $66 a month. And if you reinvest it you're going to have some compounding. And in addition to the interest checks which are from the mortgage interest they have a profit-sharing element as well. So, when they lend to a particular builder who sells the property at a profit he shares some of that profit with the fund, and the shareholders actually get 80 percent of that profit. So, for example, for 2017 the actual return of the fund was 8.7 percent, 8 percent from interest, 0.7 from profit sharing. So you actually get a little bit extra as a participation in the growth of the fund.

Hoff:  Now we are kind of in one of those boom times though, is this one of those things that it sounds really good right now because the economy is booming and as soon as the real estate market or just the market in general takes a big dip which it will that we're going to regret that? Or do you feel like it's actually more secure than having your money necessarily sitting in an index fund or sitting in the bank?

Goodman:  If you're comparing this to stocks this is much more stable than that. Now the people who ran this fund have done it even through the 2008/2009 crash and they hardly lost anything. Commercial real estate tends not to go down as much as residential real estate, and certainly the stock market. If we have a big downer the stock market will go down first. This is going to be much more stable than that. Not guaranteed but much more stable. And again, they've been doing this for a long time, the net asset value is designed to stay at $10 a share.

Hoff:  And you don't need to know anything about real estate if you want to get into this?

Goodman:  Correct. Just understand the idea. There's actually a little video that explains the whole thing at that securedrealestatefunds.com. So no, it's completely passive from your point of view. So for a lot of people who have money as you said they've been saving it, it's sitting in the savings account earning zero. This is a much better alternative to earn 8 percent instead of zero without having to be an expert in real estate at all.

Hoff:  Great, and it's taking your money that isn't your emergency fund. So, for people listening to this if you've got, "OK, I've got six months saved up in case I lose my job or something," that's not the money that you would take out and put into this necessarily.

Goodman:  Correct.

Hoff:  It's if you have well above that and it's just you've got a big chunk sitting in the bank, you don't really know what to do with it, you're not an expert investor, you're not really into buying houses for yourself and renting them out, this is one option that's relatively secure, it's a proven concept that's been around for several years, and it's very easy to manage.

Goodman:  Correct. The minimum hold time is one year. So you're exactly right. If you need it to be liquid for less than a year this is not appropriate for you. So, what a lot of people do his individual retirement account (IRA) money, or they have 401(k) rollovers. You can do what's called a self-directed IRA, put the money in there, and now it's compounding tax-free in a Roth IRA tax deferred in a traditional IRA. And you don't need the money for 10 or 20 years and you have it compounding that way, that's an ideal use of this.

Hoff:  So that would be instead of having that money directed to an index fund or directed to stocks and bonds you would have a portion of that money instead directed to this?

Goodman:  The way I look at it's an alternative to bonds and cash. Stocks do what stocks are going to do, in the long run they do really well but obviously they're volatile moment-to-moment. Bonds you're going to get maybe 3 percent with volatility. And cash as we said you're going to get zero. So to me if you have a balanced portfolio do whatever you're going to do with stocks, which are fine, but this is the kind of bond and cash portion of the portfolio at least for some of your money.

Hoff:  All right, perfect. Great information. And great, I had not actually looked into those so I will definitely be looking into that as well.

Goodman:  Great.

Hoff:  Another tip that you have is about paying off your 30-year mortgage in five to seven years now. I'll be honest, Jordan, I see a lot of these advertisements come up on Facebook or coming up on just different websites I go to talking about this and talking about paying off your mortgage really fast using a home equity line of credit. And I've always been skeptical, it seems like too good to be true, one of these things that, "Oh-oh, it's the smelling of 2006 again, 2007 leading up to a big bust." But you say that this is actually a pretty good way to pay off your mortgage much faster and save a bunch of money on interest.

Goodman:  And you'll never hear about this from the bank, Jenny. The bank likes the current system which works really well for them which is you give them your money, sitting in the checking account, earning zero as we just discussed, and then you get a 30-year mortgage you make the same payment for 30 years, all the interest on a mortgage is front-end loaded. The first 10 to 15 years you're paying very, very little principle and most of the interest. And then if you refinance you start a new 30-year clock all over again and throw away tens of thousands of dollars in interest you paid on the first mortgage. So don't expect to hear about mortgage optimization from the bank.

But yes, if you do it right it can work. Now there are three things you need to make mortgage optimization work. The first thing - you got to have equity in your house. If you're underwater in your house there's nothing to borrow against, so that's not going to work. The second thing - you got to have a decent credit score, 680 or higher, to be able to qualify for that home equity line of credit that HELOC. And the third thing you need is positive cash flow, more money coming in than going out during the month, because that positive cash flow is what's pushing the principal down on a regular basis.

There is a free website you can actually model it for yourself which is called truthinequity.com. And they have what's called a personal profile, you put in your income, your expenses, your mortgage, your house value, all those things, they're going to say, "OK, what you're doing today is going to take you 28 and a half years to pay off your mortgage. With the numbers you just gave us it'll be six and a half years," whatever comes out to be, and step by step they show you how to do it.

Basically you're keeping your money which is normally sitting in the checking account in that HELOC, which is a liquid line pushing the principal down every day. HELOCs are based on what's called average daily balance, how much do you owe today? You have a $50,000 HELOC, you put a thousand dollars in from your paycheck, you now have 49,000 instead of 50, so you're paying interest on less principal. And just keep doing that you pay your bills out of the HELOC and you're making progress every day on that principle instead of making almost no progress for many, many years. That's a much shortened version of it. The book I sent you, the Master Your Debt, I actually have a whole chapter on this thing with actual tables to show you how it actually works.

Hoff:  And what about the interest, because it does say in the book that it's a variable interest which again is one of those things that makes you very jittery the idea of a variable interest and we have no idea what's going to happen with interest rates. Is that something that is very worrisome, or you say that it's not?

Goodman:  No. So you're right. Home equity lines of credit are based on the prime rate which goes up and down, lately it's been going up. And so conceivably rates could go up and it would cost a little bit more on interest. But what people don't remember is you're paying the principal off so much faster that even if the interest rate is somewhat higher it's interest on a far smaller amount of principal, right? So if the principal is going down real fast the interest rate could go up dramatically, you'd still be ahead of the game, you see?

In fact, at that truth and equity one of the things that they do is they actually do a total impossible worst-case scenario. Today the prime rate is maybe 4.75, and they say, "OK, this is the numbers today, let's bring the prime rate today from 4 and 3/4 to 10 percent instantly," which is never going to happen but just in case. And they say, "Oh, instead of paying it off in 6.2 years you're paid off in 6.7 years," whatever it maybe. Because the key thing in a mortgage is how fast you pay off your principal. Nobody ever thinks about that way. They say, "What's my payment and what's my rate." But the real question is paying off your principal which allows you to do it so much faster, because the money you have is working for you every day, pushing that principle down instead of sitting in the bank earning nothing and working for the bank.

Hoff:  Now what if instead you basically just take the mortgage you have right now and you double pay the principal every month or you triple pay the principal every month and pay it down faster that way? Is that an alternative or is that not as efficient?

Goodman:  Not even close to as good. See, when you say you do a double payments you're giving money into the mortgage but you can't get it out. It's not a two-way mousetrap as I put it. You can't write a check on your mortgage, right? So if you give them extra payments it'll cut your pay off instead of 30 years, maybe be 27 years or something like that. So it helps you 27 years from now as opposed to right now this is helping you every day. It hurts your liquidity, it hurts your cash flow, if you're taking extra double payments and you can't get your money back out it's costing you more money now and not helping you that much.

I'd much rather pay my mortgage often five to seven years instead of 27 years. Think of the amount of interest you're going to save, think of a young couple who's 30, who has their mortgage paid off at 35 instead of 60. What a difference in their life that's going to make?

Hoff:  And so who would this be ideal for? Is that somebody who plans to stay in their house for a long time? What if you're planning to maybe sell your house the next couple of years?

Goodman:  Not necessarily. The faster you gain equity in that home the faster you pay the mortgage off, when you sell your home in two or three years you'll get to keep more of the proceeds. You'll have less of a mortgage to pay off.

Hoff:  OK.

Goodman:  I mean, if you stay in your home a long time, fine, your mortgage is paid off in five years. But if you're going to move sooner you're in better position to keep more of the proceeds when you sell the house.

Hoff:  And what are the potential risks involved with something like this versus a regular mortgage?

Goodman:  It takes some discipline and you have to kind of pay attention, so you have to kind of be interested in paying attention to the details of moving your money around. And when you're gaining more and more equity in your house it can be a temptation. God, we've got all this equity, this is great. Let's go on a Caribbean cruise or something to waste the money. So that's a potential temptation. But I find most of the people that actually implement mortgage optimization are disciplined, they do want to watch these things carefully, and they get the benefit from it.

Hoff:  OK, and you say that that could basically take a 30-year mortgage down to a five to seven-year mortgage.

Goodman:  Depends on the numbers, the faster your cash flow, the more positive cash flow you have the faster that's going to get paid down. That's correct.

Hoff:  And so you are paying more out every month into your mortgage, it's just doing a lot more work.

Goodman:  You're not actually paying more, you're actually paying less because remember every day you're making progress on the principle. So as you owe less principal you owe less interest. So the payment on the HELOC is actually going down every month until it goes to zero, and then on your first you're actually making faster progress as well. You kind of take a bulk amount from the HELOC toward your first. So I'll just give you a simple example, say the house is worth 300,000 and you owed 200,000 on your first and you've got a $50,000 HELOC. You'd write a $50,000 check on the HELOC to your first so you now at 150 instead of 200. The same mortgage payment you're making on that first is now paying off more principal because you owe 150 instead of 200. So you're actually making progress faster on the first and the HELOC at the same time.

Hoff:  OK, and you explain it all in the book because it's confusing if you're not familiar with this concept.

Goodman:  I know. It's a new idea.

Hoff:  Yeah, so it's definitely something worth reading and looking over and seeing if you have the right personality type for that. And as you said it takes a lot of management of making sure your money is moving in the right places and you're keeping track of your bills and you're making sure you have a positive cash flow at all times and that kind of stuff. So, I think that if people do want to do this - make sure you take an honest look at yourself that you can be responsible with this. If you're more of a just set it and have it automatically deducted from my account every month, I never want to have to think about it, then it might not be the best idea.

Goodman:  I would agree with you. But look at the payoff, paying a little bit more attention you're going to save literally tens of thousands of dollars in needless interest. So to me it's worth to pay a little bit of attention to have a huge payoff.

Hoff:  That's amazing and great advice, definitely something worth looking into. Another tip that you offer is verifying your loan payments, and this is very interesting. You say that many of us are paying too much for different loans that we have.

Goodman:  Correct, and they don't even know that they're paying too much. That's correct. So mortgages for example, say you have an adjustable rate mortgage. It adjusts up and down based on the prime rate, on the spread over the prime; there are all kinds of things that can go wrong. And banks often sell one mortgage from one company to another and the records get lost and all kinds of things are wrong there. There's a place that can actually help you see if your mortgage is correct which is called verifymymortgage.com, that's the first one.

The second one is escrow, when you have your payments escrowed meaning they are pulling aside money for property taxes and property insurance, in many cases they're overestimating what the taxes are going to be and what the insurance is going to be so they're taking out more than they really should. This kind of allows you to audit, maybe it's a good word, your escrow, the website for that verifymyescrow.com.

And then another one is PMI, private mortgage insurance. In theory if you get up to 20 percent equity in your house you shouldn't be paying private mortgage insurance, PMI anymore. The banks don't look at that very carefully. People are paying PMI when they're at 21, 25, and just can kind of go on and on and on. Now you could get to 20 percent equity in several ways by paying down the mortgage or say the value of your house has gone up either just because of house prices going up in your area or you've improved it, let's say you've added a lot of improvements to the house, your equity may be higher than you think and you can get rid of that PMI which can literally be hundreds of dollars a month.

I'd like to say I like to pay for insurance that covers me. This is insurance that doesn't cover you, it covers the lender. So I ain't paying that kind of thing. So the website for that is verifymypmi.com. In 30, 40 percent of the cases PMIs can be eliminated, their mortgage payment is wrong and they're paying too much on their escrow.

Hoff:  Wow. Definitely something worth looking into. And then those sites I assume they charge money in order to do the audit?

Goodman:  They do, it's a peace of mind kind of thing, right? And if it's wrong which 30, 40 percent of the case it is they'll actually write a detailed letter and say, "Here's what the mortgage payment should be. And here's how many thousands of dollars you've overpaid to that lender over the last several years and you get a refund of that." So it can pay for itself many times for you.

Hoff:  Absolutely. All right, you also recommend refinancing your car to get lower payments. Now is this just stretching out how many months you'll be paying off your car and you'll ultimately be paying more interest? Or is it there some other trick I'm not seeing there? And who would be a good candidate for this?

Goodman:  There are other ways of doing it. So a lot of people got into some pretty fancy cars the last few years and took on bigger payments than they can really afford. So instead of losing your car to the repo man at 3:00 in the morning, which is not a good experience, it ruins your credit while you're at it. You can change the maturity and interest rate on your car loan to a more affordable level, and therefore hold on to your car. There's a free website that will help you do that which is myloangen.com. You go in, you put in, it takes you about three minutes or so, you put in your current car payment, how many more months you have to go, the interest rate, how much you owe and then it gives you a little dial, kind of like a speed dial and you move the dial to where you want. If you change the maturity to make it longer you're going to bring the payment down to make it more affordable.

Say you have a car today that you've got a $500 a month payment for the next three years, and that's becoming too much for you. If you move that out to say six years your payment may go down to 250, and yes, you will pay more interest in the long run but you're not going to get your car loss to the repo man as well. So, you choose the level, interest rate and the payment you want. And then when you have something you like, you hit submit, and it goes to a bunch of credit unions around the country who compete for your business to give you the best loan for that amount. So it's just a way of people getting back control of their car loans which in many cases are much more than they can afford.

Hoff:  All right, so this is for people who cannot afford their car loans anymore essentially, and they're going to get it repossessed or they're going to have to sell it and figure something out.

Goodman:  Well, in many cases they're underwater. If you sell a car the value of the car goes down a lot faster than loan is paid off, right? A lot of cars are underwater without having driven off a bridge. And you can't sell your car because you're going to have to come up with additional cash out of your pocket to pay it off in effect, so that's usually not a good solution. People tend to like the cars they bought but they're costing them too much. So it gives them an option to pay it back, again, the website for that - myloangen.com.

Hoff:  All right, great. OK, so we've talked a lot about insurance policies, we were just talking about PMI. And a lot of my experts in the show definitely recommend insuring yourself especially for emergency situations life insurance is a big recommendation, especially if you have children or dependents who need your income. And if something horrible should happen they would be in big trouble if there was nothing coming into help cover the costs. Now you say in your book though that isn't a lifetime need necessarily that at some point you may not need that life insurance anymore that you've been paying for every month. And instead of just kind of letting it go away by stop paying it you can actually make tens of thousands of dollars off it.

Goodman:  Correct. This is what's called the life settlement market. And you're right, most people when they get to a certain age they just let the policy lapse, they stop paying the premiums, and it just goes away. And the insurance company is real happy because they've been getting money from you for many, many years and they've never had to make out a payment of any kind. Instead you can sell your life insurance policy to somebody who will then collect the death benefit and they pay the premiums, and you get a whole bunch of cash. Say you had a million dollar policy and say you were 70 years old, something like that. Say you had some kind of a heart condition or some kind of a health problem. Somebody might pay you like $400,000 in cash right now for that and then when you die they get the million dollars and they take over the premiums, as opposed to letting it lapse and getting nothing from it.

Now tell your children about this because they're not going to get the death benefit. But usually the children are fine about it. Parents should get the money out of it, use it to pay off their mortgage, pay off debts and invest for themselves, so in many cases it can work out really well.

You have to be older, I would say 70 plus actually. So this may be more for the parents of the people who are listening, the people listening directly. But it's something again the insurance company will never tell you about. And there's a website you can find out about it which is fundinglife.com. They basically put together buyers and sellers of life insurance policy. You would be the seller of the policy, and the people who buy it are hedge funds and banks and private investors. Say that guy that paid $400,000 at a million dollar policy, when the person dies they get a million dollars. So they more than doubled their money they just don't know when it's going to be.

Hoff:  I don't know, Jordan, if I love the idea of somebody just waiting for me to croak so they cannot collect money on it.

Goodman:  Well, they don't come and knock you off typically.

Hoff:  Are you sure? Oh, typically, that's the thing. That's a qualifier, typically, that's what I want to know. How much information do they have about me that they, I don't know, mess with that a little bit? It seems kind of scary.

Goodman:  It's never happened, let's put it that way. But I mean, in the meantime that person's got $400,000 right now that they can use to pay off debts and invest and make a big difference in their lives that otherwise we're getting nothing from it.

Hoff:  Well, this is definitely probably a very, very good solution for maybe an elderly parent who needs to now enter a nursing home or needs in-house care and the money is just not there to do it, but they been paying $300 a month for the last 40 years on a life insurance policy or $100 a month or whatever it is that this could now make a difference between their last years being a lot more comfortable versus stressing out about money and not having a good quality care.

Goodman:  It's an asset they have they don't even know they have.

Hoff:  Yeah, so benefiting from your own death benefit.

Goodman:  Exactly. And now while you're still alive.

Hoff:  Right, exactly. So it's very interesting and I almost want to go get my life insurance right now to have that in 30 years when I might need it.

Goodman:  Well, the older you are and the sicker you are the more money you're going to get. So if you're 85 and you've got terminal cancer you'll get a big price because the buyer's not going to have to wait very long, if you're 70 and in good shape you're not going to get as much money. The older you get obviously the more chance you have of dying and therefore the higher the price you're going to get for it.

Hoff:  OK, very interesting. Let's now talk about refinancing student loans. Perfect timing, this is the time of year where a lot of children will start entering college in a couple of months and they're going to be taking on crazy loans to fund that university experience. And now I did do a story once with SoFi and they do these refinancing student loans and they consolidate and stuff like that. But the question is if you have federal loans they're pretty forgiving when you pay them off, and I think that they'll like give you some time to find a job and all of these different protections are in place. But a lot of times people have a mix of federal and private loans which in those private loans can get very high in interest. So talk about why somebody should and want to refinance and consolidate their student loans?

Goodman:  Yeah, I would not use the word forgiving when I talk about federal loans. Now there's forbearance which is a different thing, which means the interest keeps chugging along, you just don't have to make payments for like six months after you graduate. But the interest keeps piling up anyway. But you're right, private loans are much more expensive. So, if you do one of these consolidation services and refinancing you can get typically in the 2 to 3 percent range. Now I know SoFi, they're out there, my experience with SoFi is they want extremely high credit scores, 750 or higher, huge cash flow. They want doctors, lawyers who are wildly successful.

Hoff:  Stanford graduates, Harvard graduates.

Goodman:  Well, that's nice. But that's not most people, OK? So the place that I recommend which has been better is called credible.com, and then just do /money-answers. They have a platform about five or six different lenders with different credit criteria that aren't so super high-end that the average person is able to qualify or something like that. And so, they'll combine your federal loans and your private loans into one, and again 2 to 3 percent as opposed to 4 to 6 percent on the federal loans and 8 to 10 percent or more on the private loans. Yes, you are giving up the forbearance and the other things of the federal loans. But if I'd get a lower interest rate it'll help them pay them off quicker. And actually, if you give them that credible.com/money-answers, they'll give you 200 bucks off your first payment as well. So you get a little get off to a good start there as well.

So it's such a huge burden, the average person this year graduating has got about $39,400, that's the average amount of debt, and a lot of people 50, 100, 150,000 - undergraduate. Graduate school, medical, law school, business school - 200, 300, 400,000 before they get their first jobs. So this is the crisis of this generation. And I'm not making the loans disappear but paying them off at 2 to 3 percent is a lot better than higher rates.

Hoff:  Yeah, absolutely. And so you're saying that there are sites out there and there are companies out there that are will to take you even if you don't have a perfect credit score and you aren't the first in your class from Harvard?

Goodman:  Correct, which so far that's the people they go for, which is great for them. See, the SoFi has hedge funds behind them where they get their money. And the hedge funds don't want to lose any money, so they have super, super high credit criteria which again is great for SoFi, but in my real-life experience the vast majority of people I've ever referred to them got rejected and that's not a good feeling. Where with Credible you have a choice of five or six different places, some might accept you, some might not, but you have a much higher chance of actually getting it and making it happen.

Hoff:  And where do they get their funding from?

Goodman:  Credible is like a platform, and the funders are credit unions and various other companies that are in the student loan refinancing space, so Credible itself doesn't make the loans, they're like a platform that provides the place for people to have choice of five or six different places.

Hoff:  All right, great. Now you've given a lot of great information, a lot of really interesting tips, and I'm sure tips that many of us have not even heard about or thought about or we've seen ads for and felt a little sketchy about like is this the real deal type of thing. So it's very good to know that you with your expertise and your background you actually stand by some of these tips.

Goodman:  I've vetted all these things, absolutely, for years and years and years, absolutely.

Hoff:  Now of all the things that you've been recommending or maybe it's one you haven't mentioned yet, what would you say is just the No. 1 tip that could really change somebody's life if they do it?

Goodman:  Of the ones we talked about clearly mortgage optimization to save tens of thousands of dollars in interest and to pay your mortgage off in five to seven years instead of 30 years is going to make a huge difference in people's lives, and gives them a sense of power that their money is working for them all the time. So we talked about a lot of things but I think that's the one that's got the biggest impact and will probably help most of your listeners.

Hoff:  Fantastic. Finally what gets you charged up about being America's money answers man?

Goodman:  Well, I think you can see I love it, I'm passionate about this stuff. I really like to help people. I like to provide resources that they do not know exist. I mean, just about everything we talked about today, and you're an expert in this field, you hadn't heard about it before either, right?

Hoff:  Right.

Goodman:  So to offer resources, specific things with websites that actually help people really feels great, I mean, I've been doing this a long time at Money Magazine and doing call and radio shows and speeches to all kinds of groups, to empower them. I mean, just look at what we've done in the last half-hour or so. We got them earning 8 percent of their money, we've got them paying their mortgage off in five years instead of 30 years, we got them to make sure their loan payments are accurate instead of way overinflated, we refinanced their car loan so they will not be visited by the repo man in the middle of the night, we gave them hundreds of thousands of dollars in selling a life insurance policy that otherwise it would have let lapse, we refinanced their student loans to 2 to 3 percent. I mean, we've done a lot of good stuff in the last half-hour. That really feels good to serve people and giving them resources they never even knew existed.

Hoff:  Absolutely. And I love when it's really new information that's just not as readily available. So Jordan Goodman again, Master Your Debt, that's one of your books and you also have the book Everyone's Money Book, and you have a lot of great tips in there and charts and websites and phone numbers that people can call and exact steps they need to take to start enacting some of these tips. Thank you so much for joining us today and sharing your knowledge.

Goodman:  Thanks so much, Jenny. I really appreciate it.

See related: Charged Up! podcast: How smart couples can retire rich with David Bach


Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


Updated: 10-20-2018